On Monday, CME Group announced plans to?launch Euro-Denominated Deliverable Interest Rate Swap Futures (Euro DSF) contracts on April 14, 2014, pending CFTC review.
The Euro DSF contract has been designed to meet the needs of European financial market participants, including banks, hedge funds, asset managers and insurers. The new product will complement the existing?US Dollar-Denominated Deliverable Interest Rate Swap Future?(USD DSF) by helping market participants manage their global swaps book.
According to a CME press release, this product has the same economic exposure as an interest rate swap but brings the margin and liquidity benefits of a futures contract. At its expiration, all open positions will deliver into a CME Cleared Euro Interest Rate Swap.
Additional benefits include automatic risk offsets with CME’s Treasury and Eurodollar futures and options as well as reduced clearing fees as futures are not typically subject to additional costs charged by OTC clearing members.
Several firms will serve as market makers for the product including Nomura.?
Matthew Reader, Global Head of Rates at Nomura, said in the press release,?”Nomura is committed to providing our clients with innovative ways to transfer risk, and we are pleased to be able to work with CME Group as a market maker for Euro Deliverable Swap Futures. With the advantage of exchange-based liquidity, this product will be an extremely valuable tool for both buy and sell-side risk managers and, as such, will be of strong relevance to our clients.”
Sean Tully, Managing Director of Interest Rate & OTC Products, added,?”We have seen continuous growth in our USD DSF as market participants are looking for more all in cost efficient alternatives. With the addition of the Euro DSF contract, we are offering clients another tool that further strengthens our client value proposition and position as the leading OTC client clearing solution.”
Euro DSF will be available on CME Globex and will be listed for quarterly expiration on IMM dates, for physical delivery of an OTC Euro interest rate swap at key terms to maturity of 2, 5, and 10 year and notional value of ?100,000. These contracts are listed with specific fixed rate coupons that approximate market rates. At expiration, the holder of a long futures position will become the fixed rate receiver and floating rate payer in an OTC Euro interest rate swap cleared by CME Group. The contracts will be listed on, and subject to, the rules and regulations of CBOT.